Of (Mis)Incentives in Healthcare — Part I of II

There has been something that has bothered me for a long time.

I come from a place where the vast majority (~70%) of healthcare is delivered in the private sector. This situation is not unique to Pakistan but is common across many emerging markets. It arises because the public health institutions are not able to match demand and supply of healthcare either in the quantum or in quality. Hence, leaving a room for the private sector to fill the gap.

All of that is fine, and might, in fact, lead to better provisioning of services to the people. However, the issue I have is with the incentive structure that the private sector builds its service delivery model around.

Let me build my case, by using the example of a neighbourhood clinic. Currently, one of the busiest periods for clinics is in the winter months. Why? Because these are the months when people are most susceptible to upper respiratory tract infections. In the system that we have:

busy months = more revenue for the clinic

The same logic applies to hospitals, laboratories and the entire ecosystem. The private health sector financially benefits when people are sicker. This last point strikes as absolutely bizarre for me.

To draw a parallel, let’s conduct a thought experiment. Imagine if you had outsourced the police station of a certain jurisdiction to a private contractor. You’re setting a payment mechanism for them:

Option 1: Pay for the number of crimes reported and responded to

Option 2: Pay for how safe the area was kept under their tenure

As a stakeholder, which one would you choose?

Option 1 is easy to measure and account for, but, you’re doing something dangerous, the financial incentive is aligned with increased crime in an area

Option 2 is a bit harder to measure, however, here it’s in the monetary interest of the police station to keep the area safe

This piece is not a jab at physicians, in fact when I speak to most physicians, they are unhappy with this status quo. The vast majority join this profession to serve, but the economics of the current structure of healthcare frustrates them to no end. My contention is with the system. Can this system be modified? Can we make prevention of ill-health & promotion of well-being financially profitable?

I think I have a solution. Let me share it with you in my next article, stay tuned!